So my Sociology professor made the mistake of giving us the essay What institution or institutions are the main cause of inequality in the United States? Please make your submission no longer than 1250 words. 1120 words later... Mark Ms. R. Sociology 20 October 2013 Writing Response 3 The real causes of poverty are often totally misunderstood, and it usually comes down to basic economics. The institution that drives poverty is most certainly the government. The government should not aid anyone because redistributionary policies have never proven to transcend economic prosperity. In other words, since when has dividing wealth ever created wealth? To begin, economics, in short, is defined as satisfying wants and needs while dealing with scarcity; the more efficiently you can satisfy wants and needs, the less you deal with scarcity. The biggest fallacy associated with this issue is that poverty is always a product of Capitalism and the capitalists. Poverty, first of all, is a product of a number of variables, but it never seems to be the government’s fault for causing it. How does the government create poverty? Well, you can’t understand why this happens until you understand the Broken Window Fallacy (not Zombardo’s Theory of Broken Windows). The Broken Window Fallacy states that you cannot create wealth by destroying it. The brief story behind it goes like this; A hoodlum tosses a rock at a bakery shop and shatters the store window. A crowd gathers and comes to the conclusion that the little deviant has actually created economic stimulus because now the baker has to go out and contract a glazier to install a new window pane for his shop. Now the crowd naively realizes that destroying all forms of property could create an infinite amount of economic stimulus. While the crowd acknowledges that the shop owner has just supported the glazier who will install the new window pane, what the crowd does not see is that the baker was on his way out to buy his wife a winter coat. Since the baker had to spend the money on a new window pane, not only can he no longer buy the coat for his wife, but the firm selling the coats will suffer, the supplier of the coats will suffer, and the community will now suffer because that one less coat sold means higher prices for everyone because that coat will never be made now to be sold. The gain of business for the glazier is merely a loss of business and a loss of employment for the coat industry. If the destruction of wealth can create wealth, like some may argue, why has war-torn Iraq or Afghanistan not become the world’s richest nation? The same can be said for government policies. In the event of taxation, inflation, and price-fixing, wealth is only being destroyed through division. Think of TANF and other welfare schemes as the window pane; while it may bring relief to the baker, it prevents others from enjoying the benefits of the baker’s disposable income. Inflation is the same way, by devaluing the money supply, the government is only forcing firms to increase prices on its customers. So, because of taxation, disposable income is diminished, and because of inflation, prices increase to adjust to the increase in the money supply. On top of that, now throw in price-fixing policies that set price-ceilings on “necessary” products that we need every day. All a price-ceiling does is decrease demand for products. Sure, you may have an increase in purchasing power at first, but since a company is making a product and selling it for less than what it is actually worth, the firm will only decrease production in response to that, depressing the supply of the product. Government price-fixing does not only apply to the grocery store either, it also applies to employment markets. Minimum wage laws have been the bastion of big labor-unions for generations. A hike in the minimum wage, it is argued, is only “fair” for the hard working laborer. The minimum wage, unlike the price-fixed “ceiling” on products, is a price-floor on the price of a laborer (in other words, the minimum price you can pay a worker as opposed to the highest price you can charge for a product). What the minimum wage actually does is increase the cost per each laborer. Since companies cannot afford to take losses on the wages of their employees, they are forced to lay off laborers; this creates an unemployment or a surplus of labor. The only way you can ever increase wages correctly is by cutting the costs of production, or through technology. Technology, as argued by Marx, steals jobs from those who deserve a living wage. Initially, Marx is correct, there is an unemployment created from the introduction of new labor-saving machines. What Marx does not see is that the machine does not require a wage, it pays for itself, and it consistently keeps the same work rate. Additionally, what is not seen is the industries created as a result of the new technologies. Think about the companies now contracted to build the machines, the companies that are contracted to design the parts for the machines, and the shipping companies contracted to ship the parts etc. From the introduction of labor-saving machines, a net employment is created. Think about it this way, if I were a businessman, and I needed to move a heavy freight from Chicago to New York, what would I rather use? 1 million men carrying it on their backs or one airplane? The self-checkout machines in Home Depot merely save the company money and allow them to assign employment elsewhere in each firm. By increasing the minimum wage, you are only increasing poverty and increasing prices for customers in stores even more (firms will shift the costs of more expensive workers to customers). So, now on top of higher prices and lower purchasing power, now decrease your chances of employment. In addition to that, think about that taxes on small businesses. When you tax a company breaking even on marginal cost equal to marginal revenue, you are only offsetting the equilibrium set by the markets. If you wonder why so many firms are setting higher and higher prices in this day and age, look no further than tax breaks for monopolistic firms and tax hikes for smaller businesses. The less competition there is in the market, the higher prices those fewer firms can charge on products. If I were to begin to eradicate poverty, I would deregulate the market and let the people decide the price and quantity being sold to them instead of some corporate crony raising prices on customers for fewer quantity of a certain product. If the government has already proven to us that taxes discourage production, credit diverts production, and price-fixing decreases production, why should we continue to look to government to solve the financial ills in our society?
Posted on: Tue, 22 Oct 2013 01:52:30 +0000
Trending Topics
Recently Viewed Topics
© 2015